Cryptocurrency analysts are turning bullish after favorable US inflation data sent Bitcoin (BTC) surging some 3% amid hopes of more interest rate cuts.
On Jan. 15, the US Consumer Price Index (CPI) report tipped lower-than-expected core inflation in December, causing Bitcoin’s spot price to rally from around $96,000 to nearly $100,000. Other assets, including stocks and gold, also surged.
Futures markets assign a roughly 30% chance of the Federal Reserve, America’s central bank, cutting interest rates in March, according to CME FedWatch. Rate cuts generally benefit crypto.
“Bitcoin trades like a store of value asset such as gold, so I suspect cooling inflation to aid bitcoin prices,” Bryan Armour, director of passive strategies research at Morningstar, told Cointelegraph.
Bitcoin futures for February through April are up 2%–3% as of Jan. 15, suggesting a brighter medium-term price outlook for the cryptocurrency, according to data from the CME, a futures exchange.
Futures markets’ implied probabilities for March rate cuts. Source: CME FedWatch
Related: Bitcoin poised to dip further as inflation looms: Steno Research
Inauguration jitters
However, a sustained price rally depends on whether US President-elect Donald Trump acts decisively on his promise to implement pro-crypto policies after taking office on Jan. 20, industry analysts told Cointelegraph.
“[T]he bitcoin market has interpreted the higher potential for a rate cut as positive for digital assets and has continued to push prices higher,” John Glover, chief investment officer of cryptocurrency lender Ledn, told Cointelegraph on Jan. 15.
“I still expect the prices to remain volatile and directionless until Trump makes materials moves towards relaxing regulations for crypto,” Glover said.
On Nov. 5, 2024, Trump prevailed in the US presidential elections. He has promised to appoint industry-friendly leaders to key regulatory agencies and make the US “the world’s crypto capital.” He takes office on Jan. 20.
Bitcoin futures rallied on the CPI data. Source: CME
Ongoing correction
Since mid-December, Bitcoin’s spot price has declined roughly 10%, dropping from all-time highs of around $106,000 to around $96,000 as of Jan. 14.
The cryptocurrency’s sell-off largely reflected “ongoing repricing driven by an unfavorable macroeconomic environment, with inflation once again taking center stage,” cryptocurrency analysts at Steno Research said.
Now, Bitcoin may finally be ready for a relief rally.
“[A] significant proportion of froth has come out of the market, whilst demand remains relatively robust,” crypto data service Glassnode said in a Jan. 15 newsletter.
Moreover, “the spot price is still trading above several key support levels, suggesting the bullish market structure remains intact for now,” Glassnode said.
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